Lack discipline? Maybe a line of credit isn't for you

Lines of credit on home loans are a relatively new product in the mortgage marketplace.

But the problem is that it can be tempting for borrowers to use them as a cash machine that they never have to repay.

But, of course, that is not the case at all because lines of credit are not free money.

Property Investment Professionals of Australia chairman Ben Kingsley said lines of credit can have a role in the financial landscape but discipline was the name of the game.

"In the right hands, and for the right purposes, lines of credit have their place in the product suite of options available to consumers," he said.

"But given lines of credit operate like a big credit card limit, they have the potential to be misused by some borrowers.

"So it's important that any borrower be very disciplined about how they manage their money and they must always remind themselves 'it's not your money' - it's a loan that one day you will have to pay back."

Lines of credit are a useful tool for sophisticated property investors, Kingsley said, who may use them to access equity to assist with funding their investment activities, such as helping to pay the deposit and various other buying costs.

Intuitive Finance managing director and mortgage broker Andrew Mirams said that lines of credit were sometimes more trouble than they were worth. Talk to your financial adviser and you bank to find out if a line of credit is for you.